The Ministry of Statistics defended the methodology underlying the recently published economic growth estimates on Wednesday. It stated that changes in last year's GDP and discrepancies between various price indicators are due to data and estimation method updates, not an attempt to artificially inflate growth figures.
This clarification followed two days after the government presented an updated series of annual and quarterly GDP estimates, using 2022-23 as the base period. This series incorporated a new Producer Price Index (PPI), a Bank Service Price Index, and additional administrative data.
A detailed Q&A section from the ministry addressed several issues, including negative implicit price deflators in the manufacturing industry, a significant difference between nominal and real growth in the mining sector, and a substantial statistical divergence between production-based and expenditure-based estimates.
According to the revised GDP series, the Indian economy demonstrated a real growth of 7.8% in the first quarter of the 2026-27 fiscal year. The ministry clarified that the negative implicit deflator of Gross Value Added (GVA) in manufacturing should not be interpreted as evidence of falling plant-level prices.
Gross Value Added of the manufacturing industry for the June quarter was calculated using the double deflation method, where output and intermediate consumption are separately adjusted for price changes before deriving real GVA. When raw material prices rise faster than product prices, nominal GVA may grow slower than real GVA, leading to a negative implicit deflator, even if both raw material and product prices are increasing.
The ministry reported that this mechanism resulted in a GVA implicit deflator of minus 1.5%, while real GVA in manufacturing grew by 9.2% in the quarter compared to a nominal growth of 7.7%. Sectors cited as examples where raw material price growth exceeded product price growth included the textile industry and cotton ginning, base metals, and rubber and plastics products.
The ministry also referenced international experience, noting that negative or volatile manufacturing deflators can occur in economies using double deflation during periods of energy and commodity price shocks.
Agriculture presents a different case, as quarterly GVA in agriculture is first estimated at constant prices based on production data, and then current price estimates are derived using the relevant producer price index. The ministry stated that the producer price index for agricultural, forestry, and fisheries products rose by approximately 5% in the quarter, resulting in a positive implied inflation of 3.9%.
Furthermore, the claim that the GDP estimate at current prices for the first quarter of 2025-26 was lowered from 86.05 lakh crore to 80 lakh crore to make the latest growth rate more convincing was refuted. The latest explanations aim to address questions about how the new series accounts for price changes, reflects sectoral activity, and how historical estimates are adjusted.